What is a second-chance bank account and who is it for?

A second-chance bank account is typically for people who have had problems with a bank account that led to negative information on their consumer report. Common problems that could prevent you from being able to open a regular bank account include:

• A negative balance—such as from an overdraft—that you have not repaid, and the bank or credit union closed your account (this is called an “involuntary closure”)
• Bounced checks or overdraft history
• A suspicion of fraud related to a checking account
• A joint account with someone else who had these problems

When deciding to open a new account for you, banks and credit unions are allowed to use information about how you have used accounts in the past. For example, an “involuntary closure” is generally reported to a checking account consumer reporting company. Under federal law, this information can stay on your checking account report for up to seven years, depending on the company (and even if, in the case of overdraft, you later pay back the overdrawn balance).

Each bank or credit union has its own policies about how information in your banking history report affects your ability to open an account. The bank or credit union can consider how long ago the problems happened. Some banks and credit unions require you to pay old charges, like from an involuntary closure or from overdrafts and fees, before you are allowed to open a new account.

Find out more about what to do if you’re denied a banking or checking account